TaxTMI 
TaxTMI 
2026 (9) TMI 864
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.... the Act is time-barred and is liable to be quashed. The Ld. Assessing Officer, NFAC is failed to note that the assessment proceedings were finalised by the Jurisdictional Assessing Officer, Ward-2, Kakinada vide his order dt. 09.12.2019, whereas the penalty proceedings u/s 271D were initiated by the Assessment Unit (NFAC) on 22.08.2021 after a long gap of 21 months and therefore, the very initiation of proceedings was without jurisdiction, bad in law and therefore, liable to be quashed. 3. The penalty of Rs. 9,15,000 levied under section 271D by NFAC vide order dated 22.08.2021 is liable to be quashed as invalid in the absence of any satisfaction recorded by the assessing officer vide order dated 09.12.2019 under section 143(3) of the Act. 4. The Ld Assessing Officer as well as the Ld Commissioner of Income Tax (Appeals) failed to appreciate that there is no malafide intention in accepting the sale proceeds of immovable property in cash since the total sale proceeds therefrom were offered in Return of Income and the same has been reiterated during assessment proceedings and paid capital gain tax accordingly. 5. The Assessing Officer failed to appreciate ....
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....der consideration and a reconciled statement of the cash deposits made during the year. 5. Thereafter, the Joint CIT, Range Kakinada, Kakinada, observing that the assessment order passed under Section 143(3) of the Act dated 09.12.2019 revealed that the assessee had accepted sale consideration on sale of an immovable property in excess of the prescribed limit in cash, allegedly in violation of the provisions of Section 269SS of the Act, initiated penalty proceedings under Section 271D of the Act and issued a show-cause notice dated 11.02.2021. 6. In response to the aforesaid show-cause notice, the assessee submitted that the purchasers of the subject land were agriculturists and were unaware of the tax procedures and implications and, therefore, had insisted upon purchasing the property by making payment in cash. It was further submitted that, as the assessee had been unable to find any purchaser for the subject property for a considerable period, he accepted the request of the purchasers and sold the property against receipt of the sale consideration in cash. The assessee further submitted that he was not well versed with the tax implications and the amendment made to Sectio....
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....osed under Section 271D of the Act by the Additional/Joint CIT, NFAC, Delhi. 9. The assessee, being aggrieved with the order of the CIT(A), has carried the matter in appeal before us. 10. We have heard the Ld. Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record, as well as considered the judicial pronouncements pressed into service by them. 11. Shri Gangaraju Sarma, Advocate, Ld. Authorized Representative (for short, "AR") for the assessee, at the threshold of hearing of the appeal, assailed the validity of the jurisdiction assumed by the Joint CIT, Range Kakinada, Kakinada, for imposing penalty under Section 271D of the Act. Elaborating on his contention, the Ld. AR submitted that the AO, while framing the assessment vide his order passed under Section 143(3) of the Act dated 09.12.2019, had neither recorded any satisfaction regarding violation of the provisions of Section 269SS of the Act in respect of the transaction of sale of land during the subject year nor initiated penalty proceedings under Section 271D of the Act. It was, therefore, submitted that the Additional/Joint CIT, NFAC, Delhi, lacked....
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....tisfaction of the AO regarding violation of Section 269SS of the Act and initiation of penalty proceedings under Section 271D of the Act, the subsequent penalty proceedings cannot be sustained. 13. Per contra, the Ld. Senior Departmental Representative (for short, "Sr. DR") relied upon the orders of the authorities below. It was submitted that the Additional/Joint CIT was vested with the requisite jurisdiction to initiate and impose penalty under Section 271D of the Act and had validly exercised the same by issuing the show-cause notice dated 11.02.2021. It was submitted that, vide the said notice, the assessee was called upon to explain as to why, having received sale consideration in excess of the prescribed limit contemplated under Section 269SS of the Act, penalty under Section 271D of the Act should not be imposed upon him. The Ld. Sr. DR submitted that the assessee duly replied to the aforesaid notice vide his reply dated 11.04.2021. Elaborating further, the Ld. Sr. DR submitted that the assessee had not, at any stage during the penalty proceedings before the Additional/Joint CIT, assailed the validity of the jurisdiction assumed by the said authority pursuant to the show-....
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....cifically examined whether, in the absence of satisfaction recorded by the AO in the assessment order, the Joint Commissioner could exercise jurisdiction to levy penalty. The Hon'ble High Court, after referring to the judgment of the Hon'ble Supreme Court in CIT Vs. Jai Laxmi Rice Mills (supra), held that the satisfaction of the AO is required to be recorded because the officer who passed the assessment order is not the authority who levies penalty under Section 271D. It was further observed that unless the satisfaction is recorded in the assessment order, there would be no proper basis for the AO to refer the matter to the Joint Commissioner for initiation and levy of penalty. The Hon'ble High Court accordingly held that, unless the AO, being the primary authority, arrives at a finding on the basis of the material before him during the assessment proceedings that there has been a violation of Section 269SS of the Act, there would be no occasion for the Joint Commissioner, who is not the AO, to exercise jurisdiction to levy penalty under Section 271D of the Act. Accordingly, following the judgment of the Hon'ble Supreme Court in CIT Vs. Jai Laxmi Rice Mills (supra), the penalty ord....
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....ed contravention of Section 269SS and the proposed penalty under Section 271D emerges from the proceedings initiated by the Additional/Joint CIT, Kakinada Range, Kakinada, and not from the assessment order passed by the AO. 21. In our considered view, the subsequent issuance of the show-cause notice by the Additional/Joint CIT, Kakinada Range, Kakinada, cannot substitute or cure the absence of the requisite satisfaction in the assessment order. We are of the firm conviction that the competence of the Joint Commissioner to impose penalty under Section 271D of the Act is distinct from the foundational requirement for valid initiation of the penalty proceedings. As held by the Hon'ble Supreme Court in CIT Vs. Jai Laxmi Rice Mills (supra) and subsequently applied specifically to Section 271D by the Hon'ble High Court of Andhra Pradesh in Grandhi Sri Venkata Amarendra Vs. JCIT (supra), the requisite satisfaction has to originate from the assessment proceedings. 22. We are also unable to accept the contention of the Ld. Sr. DR that the assessee's failure to raise an objection before the Additional/Joint CIT regarding the absence of satisfaction would validate the penalty proceeding....